Bristol’s business community has reacted angrily to the Chancellor’s Budget pledge to dramatically increase the National Insurance contributions of the self employed.

Philip Hammond has defended his £2 billion hike on National Insurance, insisting it will result in the self-employed making a “fair contribution” to public services.

The Chancellor is also coming under pressure from Conservative MPs to rethink the £240-a-year hit on 2.5 million self-employed workers in Wednesday’s Budget, while Labour accused him of a clear breach of the Tory manifesto pledge not to increase National Insurance contributions (NICs) for five years.

Mr Hammond insisted Britain’s circumstances had “moved on” since the 2015 election as a result of the vote to leave the European Union.

He declined to rule out future tax rises, insisting it was his responsibility to make sure the UK’s economy was “match-fit” to cope with the uncertainties of Brexit.

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While welcoming much of the Budget, Ken Simpson, regional chairman for the Federation of Small Businesses (FSB), said: “The bad news came with the announcement of increases in national insurance for many self-employed people over the next two years.

"Nearly half of all growth in jobs over the past few years has come from people starting and running their own businesses is and it is vital for the economy as a whole that we incentivise more people to do this and not place additional financial burdens on them.

“There are so many costs for people who run their own business and to add an extra tax burden now will be seen as an unwelcome announcement by many of our members.”

Chancellor of the Exchequer Philip Hammond gestures while making his Budget statement to MPs in the House of Commons

Bristol-based solicitors Thrings, has a focus on tax planning. Senior executive Stephen Horton, an expert in capital tax planning, taxation of trusts and estate administration, said: “Many self-employed people will have reason to feel sore, with Class 4 National Insurance Contributions increasing from 9 per cent to 10 per cent in April 2018, and 11 per cent the financial year after.

"Although Class 2 NICs are to be abolished, self-employed workers have, in recent years, benefited from increases in state pension entitlements which bring them in-line with employed people.

"To outsiders, therefore, this announcement could look like a “normalisation" of the current imbalanced system.”

Jenny Batchelor, partner at Grant Thornton South West, said: “The South West has the third highest proportion of full time self-employed workers in the UK, according to the ONS, so the Chancellor’s concern about the growing tax gap between those in employment and those self-employed, or using service companies, is particularly significant for our region.

“He has sought to close that gap by increasing the Class 4 NICs rate by 1 per cent in 2018 and a further 1 per cent the year after. There will still be a gap between different types of worker – employees will still pay 12. But this isn’t the big shock some see it as – the NIC rate will still be only 2 per cent for earnings of self-employed over £43,000 a year.”

Bristol-based Hargreaves Lansdown has calculated that a self-employed worker earning £30,000 will pay £282 more National Insurance in 2019 than in 2016.

Tom McPhail, head of retirement policy for the firm said: “Ever since the state pension changes of 2016, when self-employed workers’ state pensions were brought into line with employees’, this reform has been on the cards.

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“This tax hike won’t be popular with the self-employed, though it’s designed to balance out the long term windfall they received as a result of the new state pension scheme.

“We would like to see the government continue to improve pension provision for the self-employed by bringing them into auto-enrolment, via the self-assessment tax system.”

Labour’s shadow chancellor John McDonnell described the NIC hike as a “shocker“, telling ITV1’s Good Morning Britain: “There’s got to be an element of fairness about our taxation system.

“He cannot cut the taxes to the rich and the corporations and increase the taxes on the lower-paid.”

The Chancellor faced a demand to stop the NIC hike from one of his own Tory backbenchers, Anne-Marie Trevelyan, who told BBC Radio 4’s Today programme: “We need to halt this particular decision now.”

Chancellor Philip Hammond departs 11 Downing Street, London, as he heads to the Palace of Westminster for the delivery of the Budget statement

Her call came after a string of Tories voiced concern in the House of Commons that the change would hit “white van man“, backbencher Tom Tugendhat calling for a “re-think” while fellow Conservative Jacob Rees-Mogg said the Chancellor should be “very cautious” about raising taxes.

Speaking on Good Morning Britain, the Chancellor said: “Britain’s circumstances have moved on. We are now facing the challenge of leaving the European Union, of building a global Britain to exploit the opportunities in the future that this country can enjoy, and we need to invest to do that.

“I’ve had to ask the self-employed to pay a little bit more National Insurance in order to make a fair contribution for the services that they receive from Government.”

Mr Hammond said the gap in benefits received by self-employed workers and employees which has historically justified their different treatment by the National Insurance system “no longer exists“, except in relation to parental rights which he has pledged to review.

He denied the increase from 9 per cent to 11 per cent in Class 4 NICs for the self-employed amounted to a breach of the manifesto pledge, insisting the issue was “behind us” because legislation passed after the election had made clear only contributions by employees were protected.

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Asked whether more tax rises were in the pipeline, Mr Hammond said: “No Chancellor is ever prepared to rule out the possibility of future tax increases, but I’m a Conservative.

“No Conservative likes to increase tax, but we also have to pay for our public services and we have to invest in Britain’s future.”

Mr Hammond denied the Conservatives had turned their backs on the self-employed through the NICs hike and a separate Budget decision to cut the tax-free dividend allowance from £5,000 to £2,000.

Tories “strongly support” small businesses as “the bedrock of Britain’s economy“, but measures in the Budget were designed to address “perverse incentives” for workers to register themselves as self-employed, he said.

“It’s not good for them and it’s not a healthy thing for the structure of the economy to be driven by tax advantages and tax differences,” Mr Hammond told BBC1’s Breakfast.

“People should have choices about the way they work and the form they use to set up a business, but those choices should be driven by the needs of their business and the needs of the economy, not by artificial tax incentives.”

The Treasury stressed, taken together with a previously-announced decision to abolish Class 2 NICs, the amount raised by National Insurance changes taking effect from April 2018 would be just £145 million a year, the equivalent of 60p a week for 1.6 million self-employed people.

Mr Hammond insisted the NIC announcement was not a repeat of the VAT hike on hot snacks in George Osborne’s 2012 “omnishambles budget“, which had to be hastily withdrawn amid a furious backlash.

Asked on LBC Radio if he was confident he had not created Pasty Tax Two, the Chancellor said: “Yes. This is a fair measure, it is a modest measure.

“Half of the money raised will come from people in the top 20 per cent of income earners.

“Nobody earning less than £16,250 will pay any more National Insurance contributions.

“Sixty per cent of self-employed people will see a reduction in their National Insurance contributions. This is a fair and appropriate measure.”